What Companies Can Do to Attract More Female Executives
Near the end of last year corporate America got one more female chief executive — Mary Barra was named successor to GM’s Dan Akerson on December 10. This is the first woman to lead one of the biggest US carmakers and the news is good for women in business but only at first glance. When looking at the bigger picture, it turns out that the numbers of female executives in America have not moved much in the last few years, as a study by non-profit organization Catalyst shows. According to the Catalyst Quick Take: Women in U.S. Management and Labor Force research, the portion of women CEOs of Fortune 500 companies in 2013 inched up to 4% from 3.6% a year earlier, which is an insignificant change, taken that women constitute half of the total labor force in the US. Perhaps even worse is the little change seen in the number of women on executive boards — 16.9% in 2013 versus 16.6% the year before. The percentages are similar for women executives in Fortune 500 corporates, with 14.6% last year, and 14.3% in 2012. What these percentages reveal is little if any progress toward erasing the underrepresentation of women in executive positions.
Speaking to Kelly Wallace, CNN digital correspondent and editor-at-large for family, career and life, Catalyst’s chief operating officer Deborah Gillis said more companies should be making hiring more women for executive positions a priority, as “There is absolutely no excuse in 2013 to continue to have women underrepresented to this degree in the leadership of Fortune 500 companies.” There is indeed no excuse, in view of the host of studies that clearly show a positive correlation between the degree of gender diversity in the senior executive suite of a company and its financial performance. The McKinsey “Women Matter” report has found that the companies with the highest number of women executives tend to outperform financially those with fewer or no women in executive positions. Part of the reason, says Joanna Barsh, director of McKinsey&Company in New York, is the different ways men and women think and the different ways they make decisions; while men tend to be better at individual decisions and corrective action, women are better at collaboration decision-making and thinking about the bigger picture, turning a group of people into an achievement-oriented team. It is this diversity of approaches that helps make a company successful. Supporting these findings, another Catalyst report reveals that companies with three or more women on their boards had a 73% higher return on sales compared with companies with no women on board or with less than three, as well as an 83% higher return on equity and a staggering 112% higher return on investment.
Another relevant study is discussed in a report by consultancy Rothstein Kass. It found that hedge funds led by women performed noticeably better than men-led ones in 2012, posting return of 8.95% on average, against a global hedge fund index return of just 2.69%. The author of the report, Rothstein Kass director Meredith Jones, identifies two major factors determining women’s excellence in the field of alternative investments. One of these is that women are less prone to take risks than men, a quality that becomes especially important in a volatile market environment and is more likely to warrant good portfolio performance. The other factor at play is that women-led hedge funds tend to be smaller than those led by men, Jones says, which gives them better flexibility. “What women-run firms are able to do is capture the upside while really limiting the downside,” Jones concludes. It must be noted, however, that Rothstein Kass faced some difficulties collecting a relevant sample of hedge funds for its report; it used data about 67 funds and the ones led by women constituted just 16.8% of the whole sample, hardly surprising since the total number of women-led hedge funds at the time was less than 100.
It seems the statistical evidence is clearly making a case for greater gender diversity in the C-suite and there are already many companies working toward promoting more women to executive positions, an optimistic trend by all means. Website Working Mothers lists the 100 best companies for working mothers based on the schemes they have in place for flexible working hours, diversity programs and promotion to the executive level for female employees. Among the companies that made the list for 2013 is General Electric, which provides its employees with customized working schedules that allow them to work at hours and on days that are most suitable for them and it also gives them the option of working entirely from home if that is what they prefer. The proportion of women executives and managers at the company is 24%. Another working mother-friendly corporate is biotech major Genentech, also giving its employees (of whom 54% have dependent children) very flexible work hours as well as sick-child and backup care aid, and a variety of summer holiday programs involving both children and their parents. Genentech boasts 44% female executives. A third member of the top 100 list is financial services major Goldman Sachs, which regularly hosts discussions related to child care for its employees and provides them with family-related benefits, including adoptive and surrogate parents. The percentage of women in Goldman Sach’s C-suite and management team is 28%. It is obvious that companies across sectors are realizing the benefits that come from diversifying their managerial and executive make-up and motivating their employees by allowing them the time and resources to look after their families. One could hope that more will take this up.
Still, the question remains as to why there are so few women (most of them mothers) in executive positions in corporate America. According to Tom Falk, chief executive of Kimberly-Clark Corp, this is simply a question of hiring the best talent and has nothing to do with gender. It is also, he says, a question of attitudes. Four of Kimberly-Clark’s 10 executive officers are women and a fourth of board members are women, which puts the company with a proportion of female executives of over 25%. Still, Falk says that most managers only think in terms of hiring the best talent and neglecting to consider the additional benefits of coupling best talent with diversity. Another possible reason, suggested by Charlotte Laurent-Ottomane, executive director of advocacy organization The Thirty Percent Coalition, is that executive boards are renewed at very long periods of time, an average of 10 years. This, Laurent-Ottomane says, is a serious stumbling block for women who have executive ambitions. Another hurdle is the conservative mindframe of corporate leaders, who are often only willing to consider as new entries to the board current and former chief executives from their particular industry. The goal of The Thirty Percent Coalition is to bring the ratio of female executives on boards of American companies to 30% by next year.
The situation calls, above all, for an attitude change among male corporate leaders, says Harvard Business School business administration professor Boris Groysberg, who, together with colleague Deborah Bell, conducted a series of studies among more than 1,000 board members across the world, both male and female. Among the findings from the three-year research was a sharp discrepancy between the experiences of female executives and how they were perceived by their male colleagues. For instance, while many of the female respondents said they did not feel as part of the team, their male colleagues seemed to be completely unaware of this. Another thing Groysberg and Bell found was that, despite this being the 21st century, women still had to be more qualified than men in order to be considered for an executive position and they also had to make greater personal sacrifices to be promoted, as suggested by the fact that a greater portion of them were divorced as compared with their male counterparts. On the plus side, however, Groysberg and Bell’s research revealed that, contrary to popular belief, female executives were not mostly in supporting roles — 68% of the female sample were in positions such as chief executive officer, partner or president, compared to 51% of the male sample. These findings emphatically contradict the established traditional view of male leaders that there are simply not enough sufficiently qualified women to take up executive positions.
So, what can be done, aside from awareness raising and campaigning for greater representation of women on executive boards? One approach, that has been employed by a number of European countries, is imposing mandatory quotas for female executives but, says Laurent-Ottomane, this may not be the best thing to do as it is a forceful measure that would make companies bring in female executives just to fill the quota but it would not change attitudes and warrant a quality board. In Australia and Britain there have been initiatives calling for corporates to publicly disclose their gender make-up and voluntarily raise the number of female executives, respectively. Both have led to an actual increase in women working in executive positions. Voluntary works, there is no doubt about it, and it is safe to conclude that the main thing is engaging male company leaders in seeking and promoting diversity, something on which Laurent-Ottoman and Falk agree. Driving diversity higher up the corporate agenda and maintaining its place there would pave the way to a greater equality between genders in the C-suite, especially, as McKinsey’s report discovered, if this engagement penetrates not just the leadership of a company, but all levels of it. Only when everyone working for a company is fully aware of the benefits that gender diversity can bring in, not just in terms of financial performance, but also in terms of corporate culture, will there be a good chance of eliminating female underrepresentation.
1. Working Mother. “2013 Working Mother 100 Best Companies”. http://www.workingmother.com/node/146788/list
2. Wallace, Kelly: “No movement for women at the top in corporate America”, CNN, 11 December, 2013 http://edition.cnn.com/2013/12/11/living/no-change-on-women-board-seats-parents/
3. Catalyst. “Catalyst Quick Take: Women in U.S. Management and Labor Force”. New York: Catalyst, 2013. http://www.catalyst.org/knowledge/women-us-management-and-labor-force
4. Catalyst. “Catalyst Report: Linking Performance and Gender Balance on the Board”.
5. Goodkind, Nicole. “Female Hedge Fund Managers Ruled the Markets in 2012”, Blogs, Yahoo! Finance, 17 January 2013. http://finance.yahoo.com/blogs/daily-ticker/female-hedge-fund-managers-ruled-markets-2012-135223093.html
6. McKinsey&Company, “Women Matter: Making the Breakthrough”, 2012. http://www.mckinsey.com/features/women_matter
7. Rothstein Kass, “Hedge Fund Outlook: Water, Water, Everywhere”, April 2013. http://www.rkco.com/getattachment/6a25b752-557f-4112-b59a-2096370e9aff/Hedge-Fund-Outlook-Water-Water-Everywhere
8. Groysberg, Boris; Bell, Deborah. “Dysfunction in the Boardroom.” Harvard Business Review. June 2013. http://hbr.org/2013/06/dysfunction-in-the-boardroom/ar/1